Question

Joseph will receive eight equal annual end-of-year payments of $4000, beginning this year. If the market interest rate is 6%, what is the present value of these payments today? Group of answer choices $20,849.18 $26,279.18 $22,019.18 $24,839.18

Answer 1

PV of Annuity:  
   
Annuity is series of cash flows that are deposited / withdrawn at regular intervals for specific period of time at the end of the each period.
  
PV of Annuity = Cash Flow * [ 1 - [(1+r)^-n]] /r  
r - Int rate per period = 6 % or 0.06
n - No. of periods = 8

Particulars	Amount
Cash Flow	$            4,000.00
Int Rate	6.0000%
Periods	8

PV of Annuity = Cash Flow * [ 1 - [(1+r)^-n]] /r
= $ 4000 * [ 1 - [(1+0.06)^-8]] /0.06
= $ 4000 * [ 1 - [(1.06)^-8]] /0.06
= $ 4000 * [ 1 - [0.62741]] /0.06
= $ 4000 * [0.37259]] /0.06
= $ 24839.18

please comment if any further assistance is required.